4.1.5.6 Monopoly: Advantages/Disadvantages

dynamic efficiency, innovation

Advantages for consumers

high prices reduce consumer surplus

disadvantages for consumers

abnormal profit, EofS

advantages for producers

DofS, little incentive for efficiency

Disadvantages for producers

Without patents and monopoly power, drug companies would be unwilling to invest so much in drug research

Advantages for consumers: innovation — AO2

Google has monopoly power on search engines – but can we say Google is an inefficient firm who don’t seek to innovate

Advantages for consumers: dynamic efficiency — AO2

Microsoft had a monopoly on PC software and charged a high price for Microsoft Office

Disadvantages for consumers: high prices — AO2

With no competition, a monopoly can make profit without much effort,

Why is there little incentive for monopolies to be efficient?